Tax Saving FD: How one can save Rs 1.50 lakh tax under Section 80C

Fixed Deposit (FD) is a popular investment option among investors since it provides guaranteed returns and keeps them away from market risks. But not only an FD can be an option for fixed income, it can provide you the benefit of tax exemption. But all FDs are not tax exempted. Know how you can save tax through FDs.

The rate of tax saving FD in State Bank of India, the country's largest government bank, is 6.5 per cent. Photo: File/Representational

Save Income Tax Through FDs: Whenever we talk about investments, a majority of people think of options that can keep their money safe and provide guaranteed returns, which means an option that can keep them away from market risks and help them grow their money.

That's the reason fixed deposits (FDs) have been a popular investment option for decades.

The returns may be low than many of the market-linked investment options, but assured income keeps people glued to FDs.

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But what if you can also get tax exemption from investment in FDs.

One can get tax exemption up to Rs 1.50 lakh under Section 80C of the Income ax Act through FD investments.

But not all FDs give the benefit of tax exemption. Only FDs of the long term can give you tax exemption and that too when you have chosen the old tax regime.

What is a tax saving FD?

A tax saving FD is the one where the lock-in period is 5 years, which means you cannot break the FD before that duration.

If you break your FD before that, you will have to pay some penalty and you will also not get the benefit of tax exemption.

You can invest in an FD either alone or jointly.

However, in the case of a joint FD, only the primary holder will get the benefit of tax exemption.

Bank rates for tax saving FDs

The rate of a tax saving FD in State Bank of India, the country's largest government bank, is currently at 6.5 per cent.

If you make a tax saving FD in Canara Bank, you will get 6.7 per cent interest.

PNB is offering 6.5 per cent interest on the tax saving FD.

HDFC Bank is offering 7 per cent interest on the tax saving FD.

If you make an FD in ICICI Bank, you will get 7 per cent interest.

Axis Bank is also offering 7 per cent interest on the tax saving FD.

Benefits of tax saving FD

The biggest advantage of investing in a tax saving FD is that you can get ax exemption of up to Rs 1.5 lakh under Section 80C.

Whereas, if you take advantage of a Senior Citizen FD, you will get 0.5 per cent additional interest on most of the banks.

You can transfer tax saving FD from one branch to another.

If you want, you can also take a tax saving FD in the name of a child, the tax benefit from which will be given to their guardian.

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